TaxTMI 
TaxTMI 
2025 (11) TMI 855
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....t upon the corporate insolvency of the petitioner's erstwhile entity, M/s. Bhusan Steel Ltd. (hereinafter referred to as the BSL), the instant writ petitions under Article 226/227 have been filed. 2. The writ petitions have since been assigned before this Court by the Hon'ble the Chief Justice vide order dated 7th February, 2025 and are accordingly, taken up for consideration together. 3. The facts giving rise to the instant writ petitions are common and are noted hereinbelow. 4. The petitioner is a company within the meaning of the Companies Act, 2013 (hereinafter referred to as the "Companies Act") and as is apparent from the cause title of the writ petitions, the petitioner is represented through its Chief Legal counsel namely Mr. Vikash Mittal, a resident in the state of Jharkhand. 5. The petitioner also contends that its directors are citizens of India and thus, entitled to the protection of their fundamental/constitutional and statutory rights though no disclosure as regards the names of such directors have been made. 6. The directors have also not come forward to represent themselves as parties in the writ petitions. 7. According to the petitioner, at all m....
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.... and 4th February, 2011 in appeal before the CESTAT which were registered as Excise Appeal Nos. 252 of 2011, 704 of 2011, 652 of 2012 and 281 of 2011 respectively. 13. By orders dated 19th July, 2012, 5th November, 2012, 6th May, 2014 and 5th November, 2012 the CESTAT/ Tribunal at the instance of BSL waived the requirement of the pre-deposit and stayed the recovery of the equivalent penalty amounts during the pendency of the appeals. 14. During the pendency of the appeals before the tribunal, an insolvency proceeding was initiated by the State Bank of India under the provisions of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC'). The insolvency petition was admitted on 26th July, 2017 whereupon an interim resolution professional (in short, the 'IRP') was appointed who invited claims from various creditors of the said BSL. 15. The respondent No. 2 being one of the operational creditors of the said BSL, within the meaning of Section 5(20) of the IBC also filed its claim of operational debt before the IRP in form B along with accompanying affidavits dated 1st November, 2017. 16. The petitioner contends that despite filing of such claim of operati....
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....T which was also allowed on 26th September, 2023. Subsequently, the petitioner filed yet another miscellaneous application being MA. 75784 of 2023 to bring on record the legal position regarding treatment of operational claims existing prior to approval of the resolution plan. 23. It was also submitted that the CENVAT credit reversed by BSL under protest was an uncrystallized claim and hence, had extinguished by virtue of the approval of resolution plan of BSL. Accordingly, the petitioner prayed for refund of Rs. 140,46,88,065/ Rs. 2,74,86,476/- Rs. 2,09,40,479/- and Rs. 15,46,214/- respectively on account of CENVAT credit reversed by BSL under protest. The said appeals came to be disposed of by a common judgment and order dated 16th April, 2024 passed by the CESTAT, inter alia, holding that by operation of Rule 22 of the CESTAT (Procedure) Rules, 1982 and by application of the judgment delivered by the Hon'ble Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd v. Edelweiss Asset Reconstruction Company Ltd., reported in (2021) 9 SCC 657, the appeals stood abated and therefore the same must be dismissed. Although, the order impugned is under challenge, having regard to the prel....
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....ercise of the powers under Article 226 of the Constitution of India. In this context Mr. Ghosh has drawn attention of this Court to the scope of Article 226 of the Constitution of India as it stood prior to the amendment of the Constitution of India effected by the Constitution (Forty-second Amendment) Act, 1976 and the scope and effect of the case of Lt. Col. Khajoor Singh v. Union of India, reported in AIR 1961 SC 532. While distinguishing the case of Ambica Industries v. Commissioner of Central Excise reported in (2007) 6 SCC 769, he would submit that notwithstanding the Supreme Court distinguishing the judgment delivered in the case of Kusum Ingots & Alloys Ltd. v. Union of India, reported in (2004) 6 SCC 254 which is an authority for the proposition that the place from where the appeal and revisional order is passed may give rise to a part of cause of action although the original order was at a place outside to the said area, held that such proposition if accepted, the same would lead to giving rise to the problem of forum shopping and would also lead to an anomalous result, however notwithstanding the observing as above, in paragraph 17 of such judgment the Hon'ble Supreme Co....
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....ich on the face of it is a clear act of failure to exercise jurisdiction by erroneous application of the provisions. This Court has a power and competence to correct such manifest error by setting aside the order dated 16th April, 2024 and allowing the refund of Rs. 140,46,88,065/- Rs. 2,74,86,476/- Rs. 2,09,40,479/- and Rs. 15,46,214/-. 31. Per contra, Mr. Sathpathy, learned advocate appears on behalf of the respondent nos. 2 and 3 and has raised the point of maintainability. At the very outset, he has contended that this Court does not have the jurisdiction to entertain the writ petitions, inter alia, on the ground that though, the CESTAT was exercising jurisdiction within the territorial limits of this Court, however, the parent order that was under challenge was from Orissa and as such the jurisdictional High Court to challenge the same was Orissa High Court and not the High Court at Calcutta. Independent of the above, he would submit that the order passed by the CESTAT is an appealable order under Section 35G of the said Act. In support of his aforesaid contention, he has placed reliance on the judgment delivered in the case of Ambica Industries (supra) and the judgment del....
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....owever, seek to invoke the jurisdiction of this Court on the ground that part cause of action had arisen within the jurisdictional/ territorial limit of this Court, but by reasons of the Tribunal exercising jurisdiction within the jurisdiction of this Court. I find that the petitioner by placing reliance on Lt. Col. Khajoor Singh (supra) case and while distinguishing the judgment delivered in the case of Ambica Industries (supra) has contended that though permitting the petitioner to challenge an order on merit passed by the Tribunal wherein the original proceedings emanates from outside the jurisdiction of this Court would lead to forum shopping, however, the authority of the High Court to exercise jurisdiction under Article 227 of the Constitution of India for issuance of writ of certiorari in respect of order passed by subordinate Court within its territorial jurisdiction, to keep such subordinate Courts within its bound cannot be doubted. On the scope of issuance of writ of certiorari, I find that the petitioner has placed strong reliance on the judgment delivered in the case of Hari Vishnu Kamath (supra) and in particular paragraph 24 and 25 thereof. To appropriately appreciat....
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....h Court, this Court ought not to exercise jurisdiction. He has also contended that the order impugned is an appealable order within the meaning of Section 35G of the said Act and as such a writ petition ordinarily would not lie. Despite the aforesaid, on the issue of scope and powers of this Court to entertain a challenge in respect of an order passed by an inferior Court exercising jurisdiction within its territorial limits/ jurisdiction to keep such Courts within its bound by exercising supervisory jurisdiction under Article 227 of the Constitution of India cannot been doubted. The judgement delivered in the case of Ambica Industries (supra) also recognizes the same. On similar terms the other judgment relied on by Mr. Sathpaty in the case of M/s Super Sales India Limited (supra), also recognizes the power of the writ Court to exercise jurisdiction in the exceptional circumstances as culled out therein, notwithstanding the appellate remedy, though, the case is confined to exercise of jurisdiction under Article 226 of the Constitution of India and does not deal with the powers of the High Court exercising supervisory jurisdiction to keep the subordinate Courts within its bounds. ....
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....ember, 2012, 6th May, 2014 and 5th November, 2012, the CESTAT/Tribunal at the instance of BSL waived the requirement of the pre-deposit and stayed the recovery of equivalent penalty amount during the pendency of the appeals. As noted above, it is during the pendency of the above appeals before the CESTAT that the insolvency proceeding was initiated by State Bank of India under the provisions of the IBC and the insolvency petition was admitted on 26th July, 2017, whereupon an IRP was appointed, who had invited claims from various creditors of BSL. According to the petitioner, the respondents as an operational creditor within the meaning of Section 5(20) of the IBC, though had filed its claim of operational debt before the IRP in form-B, along with accompanying affidavit dated 1st November, 2017, no claim was filed with regard to the amount demanded in the orders in original, which included both tax and penalty. Later, the resolution plan was approved, which authorised the petitioner to take over the assets of BSL including all its receivables. Challenge to such approval plan ultimately, did not succeed. It is in the backdrop as aforesaid the above application had been filed. 38. ....
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....quired 10 per cent of the amount of tax, as demanded in pursuance of the order of assessment, to be paid as a condition precedent for filing the appeal. 39. The judgment delivered in the case of Vinod Metal (supra) deals with the CGST Act. A perusal of Section 107(6) of the said Act makes the position abundantly clear as the same specifically provides that no appeal shall be filed under sub-section (1) of Section 107 of the CGST Act, unless, the appellant has paid in full the amount of tax, interest, fine, fee and penalty arising out of the order impugned as admitted by him and a sum equal to 10 per cent of the remaining amount of tax in dispute, arising from the said order subject to a maximum of 25 crores, in relation to which the appeal has been filed. 40. The judgment delivered by CESTAT in the case of ACC Ltd. (supra) also considers the case of VVF (India) Ltd. (supra) and the scope and effect of mandatory pre-deposit for maintaining an appeal under section 35 of the Central Excise Act (herein-after referred to as the said Act). 41. In this context, it must be borne in mind that Section 35F of the said Act as amended specifically bars filing of any appeal, unless the ....
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.... (i) amount determined under Section 11-D; (ii) amount of erroneous CENVAT credit taken; (iii) amount payable under Rule 6 of the CENVAT Credit Rules, 2001 or the CENVAT Credit Rules, 2002 or the CENVAT Credit Rules, 2004.]" 42. I find that the said Section 35F had been substituted with effect from 6th August, 2014. Prior to such amendment, Section 35F read as follows: "35F. Deposit, pending appeal of duty demanded or penalty levied. - Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of central excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied: Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subjec....
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....w: - "10. We find that the present appeals are squarely covered by the law laid down by this Court in Ghanashyam Mishra & Sons (P) Ltd. [Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657 : (2021) 4 SCC (Civ) 638] It will be relevant to refer to para 102 of the said judgment which reads as under : (SCC p. 716) "102. In the result, we answer the questions framed by us as under: 102.1. That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. 102.2. The 2019 Amendment to Section 31 of the I&B Code is clarifi....
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....s reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;" "(10) "creditor" means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder;" "(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;" "(12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be;" 45. It is well settled principle of law that all provisions in the statute have to be construed in context with each other and no provision can be read in isolation. I find that the Hon'ble Supreme Court while interpreting the provisions of the IBC in the case of Kotak Mahindra Bank Limited v. A. Balakrishnan, reported in (2022) 9 SCC 186 has noted that default has to be defined to mean non-payment of debt. The debt has been defined to mean a liability or obligation in respect of a claim which is due from any person and includes any fi....
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....o as the Information Memorandum does not provide for payment of Liquidation Value to the Other Creditors. Please refer to Section 8.4 of the Plan for further details in this regard." "8.6.10. Effect on Operational Creditors and Other Creditors Upon approval of the Plan by the Adjudicating Authority: (i) Except to the extent of the Operational Creditors Settlement Amount proposed to be paid payable to the relevant Operational Creditors in accordance with the terms of Section 8.2.2, the Company shall have no Liability, directly or indirectly, towards any Operational Creditors and Other Creditors with regard to any claims (as defined under the IBC) relating in any manner to the period prior to the Effective Date (whether under Annexures 8, 9, 10, 11, 12 or otherwise), other than as set out in this Plan. Any such Liability shall be deemed to be owed and due as of the Insolvency Commencement Date, the Liquidation Value of which is NIL and therefore no amount is payable in relation thereto. All such Liabilities shall immediately, irrevocably and unconditionally stand fully and finally discharged and settled with there being no further claims whatsoever, and all....
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....mental Authority was aware of such claim at such time), shall be deemed to be owed and due as of the Insolvency Commencement Date, and shall immediately, irrevocably and unconditionally stand abated, settled and extinguished. No Governmental Authority shall have any further rights or claims against the Company, in respect of the period prior to the Effective Date and/or in respect of the amounts written off." 46. A conjoint reading of the above would demonstrate that there was no debt or liability of the petitioner towards the respondent No. 2 who was an operational creditor for the relevant period. As noted above, a claim means a right to payment whether such right is reduced to a judgement or not. It could thus be seen that unless there is a claim which may or may not be reduced to a judgement there would be no debt and consequentially no default in the form of non-payment of such a debt. Admittedly, as on the date when the CIRP proceeding was initiated, there was no outstanding debt. 47. In this context I may note that it has been rightly pointed out by the Mr. Ghosh that having regard to the clauses 8.2.1 and 8.2.2 of the resolution plan and clauses 8.2.4, 8.2.6, 8.6.10 a....
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.... the case of Ultratech Cement Nathdwara Cement Limited v. Commissioner of Customs, Jamnagar (Preventive) wherein the very question raised by the learned Sr. Counsel that Rule 22 of The Rules was applicable to a company only when it gets wound up was one of the issues under consideration. It was categorically asserted by the Tribunal that there is no provision under the Customs and Central Excise Act/Rules to give effect to NCLT proceedings. The Tribunal being a creature of the statute, in the absence of any explicit provision, it is handicapped to decide on the same. In fact, it is necessary to reproduce hereinbelow the finding and the manner in which the Tribunal dealt with the said question of law: "4.2 From the above facts, we find that as per the resolution plan approved by the NCLT and in the light of Hon'ble Supreme Court judgment in the case of Ghanashyam Mishra & Sons Pvt. Ltd.-2021 SCC Online SC 313, it prima facie appears that the adjudged dues cannot be recovered by the department however, this issue has to be decided by the department and not by this tribunal. For this reason, that firstly, there is no provision made in the Customs and Central Excise Act to....
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....ment has taken over the Company as part of the Resolution Plan. 6. At the outset it is clarified that the contention of the Petitioner-Company that there is nothing in the said judgment which says that the past credit due to the company gets expunged; is misconceived. As a matter of fact, the liability of the earlier management may not be shifted to the current management but at the same time, the credit available to the earlier management will also not be available to the current management as the current management was not a taxpayer during the period of procurement of inputs or capital goods as availed in the TRAN-1 filed on 30.11.2022. Accordingly, we hold that on the one hand; the Respondent No. 2 has illegally and arbitrarily confirmed the demand of Rs. 6,02,34,616/- u/s 74(9) of the Central Goods and Service Tax Act, 2017 and imposed interest and penalty, on the ground of irregular availment of transitional credit during the period 2017-18, which includes the transitional credit of Rs. 5,10,21,204/-claimed by the Petitioner for the period prior to 17.04.2018 and balance amount of Rs. 92,13,412/- has been claimed by the Petitioner as Transitional credit by f....
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....the case of Commissioner of Central Excise, Bangalore-III v. Dhiren Gandhi, held that the Hon'ble High Court was correct in its conclusion that while interpreting the provisions of the Central Excises and Salt Act, legal heirs who are not the persons chargeable to duty under the Act cannot be brought within the ambit of the Act by stretching its provisions. Viewed in the backdrop buttressed by the provisions of Rule 22 of The Rules, the issue in the present case is somewhat akin to the given circumstances, but instead of the legal heir it is now the new operators, who in turn are operating the erstwhile company (original appellant/BSL), in accordance with the Resolution Process as laid out in law. Moreover, what is good for the goose has to be good for the gander as well. 35.2 The Hon'ble Apex Court in the said judgement noted and reiterated the legal position by citing the case of in Partington v. A.G., as under: "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within t....
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....to the question whether the tribunal has acted within its authority without questioning the correctness of the decision on facts. I find that CESTAT/ Tribunal being creature of the statute in absence of any express provision could not have adjudicated as to whether the voluntary deposit made by the petitioner prior to filing of the appeals would constitute a security deposit, once, the appeals had abated. The petitioner has however, taken a chance and has not filed an appeal from the above order but has questioned such order in the limited supervisory jurisdiction of this Court. 52. It is an admitted position that the respondent No. 2 as an operational creditor, by reasons of the original corporate debtor, voluntarily discharging its liability, did not include any claim in relation to the assessment already made by orders dated 31st January, 2011 for the period 1st August, 2005 to 31st December, 2006, and 1st February, 2007 to 6th July, 2009. In the interregnum during the subsistence of the adjudication orders the appeals stood abated by operation of law. As noted above there appears to be no irregularity or jurisdictional error in the common order passed by the CESTAT/Tribunal.....